Business Optimization Models

30 Dec Business Optimization Models

Matt Christensen

Amongst the most satisfying projects are designing and constructing Business Optimization Models.  These are solutions built to answer future-looking key questions — usually revolving around Return on Invested Capital.  They start out sounding like business school case studies, but successful solutions must be sustainable and can’t rely upon “what happened next” to provide the answer key. 



Example Opportunities:

  • In which customers and with which products should we focus our time and marketing?
  • When, where, and with what models should we replace our aging assets?
  • What is the best strategy for sourcing raw materials or using our resources?
  • How should we model our legal entities?


While there are many variations to the projects that could fall within this category, they share a few commonalities.  A combination of historical data and the future outlook is useful as a starting point.  Several functional areas require information. Business strategy and leadership philosophy are important considerations.  The model results may be in financial terms, but it requires operational metrics within its core and also as an actionable output.

You may think Spreadsheets.. but think again…

Strategic thinkers may contemplate building these models in a spreadsheet application.  It’s a tool they can use independently and quickly while drawing together data from a variety of sources.  While this is a useful starting point, it becomes challenged with complex logic, data volumes, version management, and collaboration capabilities.

Moving to an enterprise platform, such as SAP Business Planning and Consolidation, can overcome these limitations.  It allows several concurrent users to revise input factors and simulate the anticipated results.   Then, it can save multiple versions to compare useful combinations. In addition to the ultimate outcome, interim results of calculations can be analyzed for feedback.

Continuing to Use your Business Optimization Models

Ongoing improvement is a key commitment to harvesting full value from these solutions.  There is value in both the journey and the destination.  Bringing together cross-functional teams of leaders to discuss the future can align decision making and resource allocation.  Looking back at past simulations in comparison to actual results can confirm suspected or even unveil new realizations.  Solution maintenance should be anticipated at least annually.

These projects can be surprisingly affordable as they can leverage existing investments in technology and business intelligence.  Finding time for key leader participation can be challenging.  They can focus on deploying strong solution builders who understand both business and technology concepts.

Take a chance on prioritizing investment in Business Optimization Models.  The results could be highly valuable and the learning opportunity is definitely worth the effort.


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